CORPORATION SEALS AND POWERS OF ATTORNEY

Transcription

1 CORPORATION SEALS AND POWERS OF ATTORNEY I have been asked to address a few practical issues which arise in real estate practice concerning corporations and Powers of Attorney. I will deal with these issues under separate headings below: 1. Must the Corporate Seal be affixed to a deed from a corporation in order for the deed to be valid? This question involves a consideration of property law, corporate law and practice among solicitors and at the Registries of Deeds. In property law we must distinguish between a deed and a conveyance. A deed by definition is an instrument written on paper sealed by the party executing it and conveying a property interest or creating an obligation. See Halsbury's Laws of England, 4th Edition, Volume 12, para So by definition a corporation would have to affix its corporate seal to create a valid "deed". However, conveyance of real property may not require a deed. Although there is no clear jurisprudence settling this issue in Nova Scotia, I consider that where a conveyance is made for good or valuable consideration, section 12 of the Conveyancing Act, R.S.N.S. 1989, c.97 validates such conveyance where the following provisions are satisfied: 12. Except in the classes of conveyances where an e~actment prescribes the mode of execution and in addition to any other mode now in use a conveyance is validly executed where it is: (a) Signed by the party who conveys or some other person in his presence by his direction, or by his attorney;

2 - 2 - (b) Sealed by the party who conveys or some other person by his direction, or is given for good or valuable consideration; and (c) Delivered or, in the case of a deed poll, published and declared. "Party" is defined in section 2(b) to include any body corporate, as well as an individual. An unsealed conveyance from an individual given without good or valuable consideration may even be valid if Butt v. Humber (1976), 6 R.P.R. 207 (Nfld. S.C.) is followed in Nova Scotia. Goodridge, J. states at page 219: "We surely should no longer consider a red wafer seal, or printed words importing a seal, or symbolic action such as placing one's thumb on a deed as things of magic, transforming an instrument or other document into a deed. Surely a man's signature is as good as, or even, better than his seal." Goodridge, J. continues at page 220: "I am of the opinion therefor that where an instrument duly signed by the grantor, purporting to convey a present interest in land to the grantee, delivered to the grantee, accompanied by the delivery of possession (vacant or otherwise) to the grantee if he is not then already in possession, the interest which is purported to be thereby conveyed, (or the present interest of the grantor therein if that is less than what he purports to convey) passes thereby to the grantee notwithstanding that the instrument is not sealed and was not executed for good or valuable consideration."

3 - 3 - Although the Conveyancing Act does not state that a conveyance must satisfy s.12, it is possible a Court would not validate an unsealed conveyance given without consideration and I would be hesitant to rely on the authority of Butt v. Humber in Nova scotia. Where the grantor is a corporation, additional factors relating to corporation law apply. The common law required a corporation to evidence its acts by its common seal, see: Kootenay savings Credit union v. Toudy et al (1987) 48 R.P.R. 68 (B.C.S.C.) at page 72. This requirement was relaxed significantly by provisions in corporations statutes. For example, with respect to a company incorporated under the Canada Business corporations Act, ("C.B.C.A.") section 23 states: "An instrument or agreement executed on behalf of a corporation by a director, an officer or an agent of the corporation is not invalid merely because a corporate seal is not affixed thereto." similar provisions are found in a number of other Federal Statutes such as s.256 of the Bank Act, S.C. 1991, c.46. For companies incorporated under the Companies Act, R.S.N.S. 1989, c.81, the following provision is relevant: "101(1) contracts on behalf of a company may be made as follows: (a) Any contract which if made between private persons would be by law required to be in writing and if made according to the law of the Province or of the Dominion of Canada, to be under seal, may be made on behalf of the

4 - 4 - company in writing under the common seal of the company, and may in the same matter be varied or discharged; (b) Any contract which if made between private persons would be by law required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged; (c) Any contract which if made between private persons would by law be valid although made by parol only, and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged." The wording in the Nova scotia Companies Act appears narrower than in the C.B.C.A. because in the former only the word "contract" is used and in the latter the words "instrument or agreement" is used. I would submit that a conveyance given for good or valuable consideration would be considered a "contract" within the meaning of the Nova scotia Companies Act because a contract is an agreement supported by consideration. Thus, there would be no material difference between the provisions of the C.B.C.A. and the companies Act for such a conveyance with consideration. However, I would submit that a conveyance without consideration would not be by definition a "contract" and would therefore require a seal to be valid under the Nova scotia Companies Act, although it would likely be considered an instrument under the C.B.C.A..

5 - 5 - other relevant statutory provisions include the Corporations Miscellaneous Provisions Act, R.S.N.S. 1989, c.100, s.13 states as follows: "13 (1) Every contract made or entered into by any corporation within the scope of its charter or act of incorporation, under such conditions and circumstances and in such manner that the same would be valid and binding if the corporate seal were affixed thereto, shall be so valid and binding notwithstanding the failure or omission to affix a seal. (2) This section shall not make valid any contract of a corporation which, if made by any person other than a corporation, would be "invalid for want of a seal. (3) The affixing of a seal to the contract of a corporation shall have the same effect as the affixing of a seal to the contract of an individual." The above paragraph applies to "any private company" and not just to companies incorporated in Nova scotia or under any particular legislation in Nova Scotia, but adds little to s.101 (1) of the Companies Act. section 42 of the corporations Miscellaneous Provisions Act applies to companies incorporated under authority of an act of the legislature of Nova scotia (other than the Companies Act) appears to be worded more broadly because it extends to "acts" and not merely "contracts". It states as follows:

6 - 6 - "42 The acts of any company performed within the scope of its charter or act of incorporation shall be valid, notwithstanding they are not done under or authenticated by the seal of the company.1i As any conveyance must be registered to preserve its priority, I refer to the Registry Act, R.S.N.S. 1989, c.392, s.30 which requires that before any instrument is registered the execution thereof shall be proved as specified in the Act. Subsection 2 states as follows: "30(2) Any instrument may be registered where the signature of one or more of the parties thereto is proved. II Thus, the Registry Act does not require a seal before an instrument may be registered and I understand that the Registries of Deeds will accept an unsealed conveyance for registration, as they should do, in my view. Some support for the foregoing propositions can be found in the Kootenay Savings Credit Union case (supra) which considered an obscure issue of whether undisclosed principals can sue or be sued on a mortgage made on their behalf. The British Columbia Supreme Court drew a distinction between those rules applicable to individuals and those to corporations. The Court stated that at common law an unsealed contract of a corporation is enforceable nei ther by nor against a corporation. The Court referred to sections in the British Columbia Company Act which are virtually in the same language as s.101 of the Nova scotia Companies Act and the Court concluded that a mortgage executed by a corporation without its corporate seal would be effective against the corporation. In

7 - 7 - that case, however, the mortgage could not have been recorded at the Land Titles Office because of a provision in the Property Law Act, R.S.B.C. 1979, c.340 requiring an instrument executed by a corporation to be executed under its corporate seal in order to be registrable. Thus, I conclude that if a conveyance executed by a corporation without corporate seal is given for good and valuable consideration, it is valid. However, where a conveyance is given without good or valuable consideration and without corporate seal, I would anticipate a Court would not uphold the conveyance if granted by a company governed by the Nova scotia Companies Act. 2. Can a corporation validly authorize by Power of Attorney an individual to sign a deed on behalf of the corporation? If so, is a corporate seal reguired on the original Power of Attorney? The Nova scotia companies Act, s.103 provides as follows: "A company may, as to all matters to which the corporate existence and capacity of the company extends, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place situate within or without the province, and every deed signed by such attorney, on behalf of the company and under seal, shall bind the company and have the same effect as if it were under its common seal." since a Power of Attorney is generally not supported by consideration so as to qualify as a "contract" under s.101 of the

8 - 8 - companies Act, and since s.103 is more particular than s.101 of the Nova Scotia Companies Act in that it refers to execution of deeds, in my opinion a Power of Attorney signed by a corporation ought to be under seal and the deed or conveyance so signed on behalf of the corporation by the attorney-in-fact ought to be signed under seal of the attorney-in-fact. Section 24 of the Registry Act states as follows: "The registry of any instrument executed under a Power of Attorney shall not be valid or effectual unless such Power of Attorney, or a deed subsequently confirming the authori ty given thereby, is registered in the manner provided by this Act in the registry in which such instrument is lodged for registration." Thus, the requirements for proof of execution contained in the Registry Act are required in connection with the execution of the Power of Attorney as well as the deed or conveyance signed by the attorney-in-fact. There is no equivalent in the C.B.C.A. of s.103 of the Nova scotia Companies Act, and accordingly the generality of s.23 of the C.B.C.A. would likely ensure that a Power of Attorney need not be signed under seal by a C.B.C.A. company. 3. Can a director of a corporation give his personal Power of Attorney to another person to act as a director of that corporation? I think the short answer to this question is no. A director

9 - 9 - occupies a position with fiduciary responsibilities to the corporation. Unless there is a particular section in the articles, by-laws or act of incorporation permitting the appointment of a proxy by a director to another person to serve in her or her capaci ty as director, such a proxy would be invalid. In my experience it is very rare to see such a provision. If one of the directors will be absent during the time a deed would have to be signed, that director may sign a resolution authorizing the other directors to execute the deed. If authorized under the articles, the directors may delegate to a managing director or committee of directors many of their powers pursuant to s.115 of the Nova scotia Companies Act. Alternatively, a Power of Attorney could be signed authorizing one or more of the directors to act on behalf of the corporation in connection with a particular transaction, which would avoid the requirement for further directors resolutions approving agreements or authorizing deeds to be signed. 4. Can a corporation sign a Power of Attorney giving a person other than an officer or director the right to swear a matrimonial affidavit on the part of the corporation? A practical problem arises for every person signing a deed as an attorney-in-fact under a Power of Attorney, namely the request by the purchaser for completion of the matrimonial property affidavit contemplated under s.8(3) of the Matrimonial Property Act, R.S.N.S. 1989, c.275. In a balancing act between the rights of a non-titled spouse in a matrimonial home against the rights of an innocent purchaser_for

10 value, the Matrimonial Property Act specifies that the innocent purchaser may rely on an aff idavi t of the person making the disposition that this person is not a spouse, that the property has not been occupied by that person and his or her spouse as their matrimonial home or that the spouse has released all rights to the matrimonial home by a Separation Agreement, Marriage contract or designation under the Act. For properties owned by a corporation, s.3(3) of the Matrimonial Property Act states that where the ownership of shares in that corporation entitles the owner to the use of a dwelling owned by the corporation, then that ownership of shares is deemed to be an interest in the dwelling which may qualify as a matrimonial home under s.3(1). In such cases, the practice in Nova scotia is for the purchaser to require an officer of the corporation who signs the deed to sign an affidavit stating that the dwelling has not been occupied by a shareholder as a matrimonial home nor does ownership of the shares entitle any shareholder to use of the dwelling as a matrimonial home. section 8(2) of the Matrimonial Property Act states that a disposition infringing s.8(1) may be set aside on the application of the non-titled spouse "unless the person holding the interest or encumbrance acquired it for valuable consideration, in good faith and without notice that the property was a matrimonial home". If the purchaser acquires the property for valuable consideration and in good faith, the issue of whether the purchaser had notice that the property was a matrimonial home is critical as to whether the purchaser can rely on the Affidavit, which is the same test under s.8(2) that allows the non-titled spouse to have the transaction set aside by Court order. Thus, I submit that a further affidavit under s.8(3) adds no real protection for the purchaser who in fact

11 acquires it for valuable consideration in good faith and without notice that it was a matrimonial home. It is in my view not possible for the attorney-in-fact to sign an affidavit for another officer of the company, but any duty of inquiry would likely be satisfied if the attorney-in-fact swore an affidavit under s.8(3) in the usual form and adding that he or she has made due inquiries as to whether the property has been occupied by a shareholder and his or her spouse as a matrimonial home and whether ownership of a share entitles a shareholder to use the property as a matrimonial home.